Government-owned Bharat Heavy Enterprises Limited (BHEL) has moved the National Company Law Appellate Tribunal (NCLAT) challenging the decision of the Committee of Creditors (CoC) of Monnet Ispat & Energy to assign nil liquidation value to operational creditors and the approval of the resolution plan based on the same by the National Company Law Tribunal (NCLT) Mumbai.

The NCLAT has agreed to hear BHEL on the issue and issued notice to the company and JSW Steel, which had emerged as the highest bidder for Monnet Ispat. It will next hear the matter on February 8.

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"During the pendency of the appeal, if draft resolution plan is given effect, the same shall be subject to the decision of this appeal," a two-member Bench headed by Chairperson Justice S J Mukhopadhaya said.

The CoC of Monnet Ispat & Energy and NCLT Mumbai had last year approved a sole Rs 2,875-crore resolution plan placed by AION Investments-JSW Steel to acquire the company. The financial creditors of Monnet Ispat & Energy had to take a massive 74 per cent haircut with respect to their dues. The resolution plan proposed to pay only Rs 25 crore to the operational creditors against their dues of nearly Rs 450 crore.

BHEL, which has dues of Rs 15 crore against Monnet Ispat, approached NCLT Mumbai against the resolution plan. The tribunal, however, dismissed its plea saying that as the CoC had already approved the resolution plan submitted by the AION Investments-JSW Steel consortium and assigned nil liquidation value due to BHEL, it would not admit the claim.

"It is our contention before NCLAT that the law does not intend for operational creditors to be treated unfairly. Operational creditors are suppliers of critical equipment and services to debtors. Any resolution plan which does not take into account their interests is neither feasible for viable," the lawyer for BHEL, Anand Verma, told Business Standard.

In its petition before the NCLAT, BHEL has also sought to know from the NCLAT whether such resolution plans which provide for nil liquidation value due to operational creditors are in contravention of Section 30(2) of the Insolvency and Bankruptcy (IBC) Act and if they can be approved by the adjudicating authority under Section 31 of the Act.

Section 30 (2) of IBC provides for mandatory payment to be made to the operational creditor in a resolution plan, while Section 31 deals with the approval of a resolution plan.

BHEL, in its petition challenging the NCLT Mumbai order, has also contended that though the minimum value to be provided to operational creditors in a resolution plan is the liquidation value due to operational creditors, it cannot be limited only to the liquidation value.

"Thus, prescription of liquidation value as minimum amount to be given to operational creditors can in no way be construed to mean that the operational creditors at all times shall be provided with only liquidation value," BHEL said in its petition.

The view that operational creditors should not be treated unfairly has also been taken by NCLAT in other cases, Verma said.

"We are arguing that the rights of operational creditors should be crystallised once and for all," he said.